Tax Reform Update

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Tax reform is a hot topic in the US this holiday season, with much activity at the federal level. On December 2, the Senate passed H.R. 1, the Tax Cuts and Jobs Act, by a vote of 51-49. Prior to Thanksgiving, the House passed a similar bill by a vote of 227 to 205. The House and Senate have established a conference committee to reconcile the bills for a final vote. Congressional Republican Leadership and the White House want a bill on the President’s desk before Christmas.

We have provided a few of the notable provisions below:

Individual Income Tax Rates: The House bill condenses the current seven individual income brackets to four: 12%, 25%, 35% and 39.6%. The Senate bill maintains seven brackets but changes them to: 10%, 12%, 22%, 24%, 32%, 35% and 38.5%.

Standard Deduction: Both bills double the standard deduction to $12,000 for individuals and $24,000 for couples.

Home Mortgage Interest Deduction: The House bill limits the deduction to the first $500,000 of the loan for new home purchases (existing loans are grandfathered). The Senate bill retains the current $1 million limit.

State and Local Taxes: Both bills end the deduction for state and local income and sales taxes but allow it for up to $10,000 in property taxes.